Just our luck.

Screen shot 2013-07-10 at Jul 10, 2013, 1.42.15 AM

We went under contract on our first home purchase the same day Bernanke decided to announce the feds plan to slow down their quantitative easing policy. It was quite frustrating.

Had we found this same house just 30 days earlier we would have been looking at an interest rate on our loan of about 3.7%. Rates rose like crazy after Bernanke spoke. 4.125%. Then 4.375%. Then 4.5%. Then 4.75%. They rose a full percent in about a week.

While one percent may not seem like a huge deal,  it has a giant impact on our monthly payments. The difference between 3.7% and 4.5% is about $133 per month. Stretch this out over a 30 year loan, and we would be paying $47,880 more. This is especially frustrating because this $47,880 doesn’t go towards our principal balance, it goes straight in to our lender’s pockets. 

After watching rates steadily climb day after day, we pulled the trigger and locked at 4.5%. I felt defeated. Had I known rates were going to spike right at the time we went under contract, we may have never put an offer in. Fortunately, I’ve known our loan officer for about 10 years and he is looking out for us. We were talking on the phone every day, mulling over our options. I got an email about a week after we locked, saying our lender was able to renegotiate our rate to 4.125% at no cost to us.

HALLELUJA!

While I wish our rate was 3.35% like some got six months ago, I just need to remind myself that the house is more important than the rate. I’d rather own a home at 4.125% that I love, over a house I don’t love at 3.5%.

Moral of the story: I’ve once again proved the point I have really, really, really bad timing with things that are out of my control.

All I can do is laugh, it’s the only thing keeping me sane.

32 thoughts on “Just our luck.

  1. I was very worried about rising interest rates in my HELOC so I locked in at a lower rate last week.

    I as paying prime plus a half and that was up to 4% but was able to lock in at 2.99% but only for one year. I am worried about where rates will be after that one year.

  2. Look at the bright side: You had a very good loan officer who looked out for you. How much more will you be paying every month now with this rate.

  3. We bought our first house in 1995 at 8.875%……although it was reaaaaaally cheap (the bank was laughing as some people’s car loans were bigger than our mortgage). Our current house was bought in 2003 at 5.525%, and renewed at 5%. So, I look at your rate and think you’re doing really good!

    I admit when we bought the first house, some co-workers were commenting about their rates of 18% in the 1980’s. Yikes! (Yes, I realize that housing costs were way lower back then, but still — 18%!)

  4. OBVIOUSLY you are going to make ninja payments on it paying if off way early so it won’t be that dramatic…

    …however, our rates is 4 so you do have only slightly worse timing than other at this particular time.

  5. It is a drag that it happened right after you found a house, but as Katy above noted, in the 80s my parents were paying 18% on their mortgage, as if your house was on your credit card for heaven’s sake! As Drewman said, you’ll probably have it paid off early anyway, so the spike won’t affect you soooo much. Enjoy your home Ninja!

  6. This is exactly how we feel! At first we were tempted to buy really quickly because of the increasing rates, but we also don’t want to buy something we hate.

  7. “I just need to remind myself that the house is more important than the rate.”

    That is correct. And as others have said, you can accelerate the mortgage and thus reduce your potential interest payments by putting an additional amount towards the principal each month. You seem to be forgetting also the potential effect of inflation, where you’ll be paying with cheaper dollars as the loan progresses.

    Basically in other words, don’t worry about this.

  8. If you’ve got a fixed interest rate which is near or lower than your expected return from other investments, and you plan on staying in the house long term, what is the point of paying it off early? And what is “early?” 20 or 25 years instead of 30?

  9. Yeah, I wondered about your situation actually when I saw that rates took that jump :(. It was abrupt but it had to come sooner or later, I guess.

    You are doing the 20% down, right? PMI rules have changed this year, so you’d have to refinance to stop paying PMI. And if you do that…who knows what the rate might be on down the line.

    Aren’t you glad you didn’t buy a share of that investment property now?

    • 20% down means that ninja should have non FHA loan shouldn’t be paying PMI at all. That hasn’t changed even with the new rules.

      • In an earlier post, he mentioned considering not putting 20% down even though he could, just to not tie up his cash, so I wasn’t sure if he was still planning on the conventional loan route or what

        • Ninja said a lot of things in the lead up to the purchase but he won the house over someone who bid higher because the other buyer was going to go 3.5% down FHA. FHA has multiple conditions the house and the borrowers must meet before it will fund the loan which often kill home sales. Inability to obtain a certain loan is usually written into the purchase contract as condition that would require a full refund of a deposit. The seller likely accepted ninja’s lower offer specifically because ninja is not going FHA and the difference in sales price not being worth the extra hassle.

      • Not anymore. There are new rules in place in effect I think April or June of this year, making PMI a big, hairy monster that doesn’t go away unless you refinance :/

      • Not anymore. There are new rules in place in effect I think April or June of this year, making PMI a big, hairy monster that doesn’t go away unless you refinance :/ That’s for loans taken out after that fact

  10. Keep an eye on the rates… if they happen to drop, have your lender float the rate down for you.
    Even if they don’t drop, its not like you guys will be paying all that extra interest, with extra payments. The extra money is worth the peace of mind in knowing you found an amazing home you both love

  11. This is a great worry for me too. We’ll be house shopping in about 6 months and I fear that rates will be going up. While the increases SEEM small, when broken down like you do, it shows how much these small raises in rates really do matter.

  12. my parents first house loan was 17 or 18% if that makes you feel better and mine was 6.25. But yeah, I thought scored a killer refi awhile back @3% for 15 and friends of ours got well under 3 just a month later and it was so disheartening. But you have a good attitude about it – and I doubt the bank will get all that interest given your super ninja money skillz . . .

  13. Even at a rate that is higher than you had hoped to pay, you are still dealing with historically low mortgage interest costs. When you are an old, wrinkled ninja and you are chilling with your silver-haired girl ninja on rocking chairs on your fully paid-for front porch, you will think back to your 4.125% angst and laugh out loud together over the fact that you experienced even a single moment of indecision.

  14. Price is more important than interest rate! You can refinance if the rate drops. This house will probably not be your last home, unless you decide to rent it out eventually.

    • I disagree. While its true one can refinance if rates drop, the reality is I will probably not see rates this low again for as long as I own the home. If we weren’t at historically low rates then I’d agree with you, but a half a percent interest rise affects monthly payments a heck of a lot more than a $10k price increase.

  15. We were very fortunate to refinance when the interest rates are super low – until 2016 we have a prime minus mortgage. We are currently paying 2.35% on our house, which is wicked awesome…However, knowing that it’s only a matter of time before the prime lending rate begins to rise makes me shed unicorn tears.

  16. krantcents has a great point! So many times we are so concerned over the monthly payment we lose sight of everything else. Hopefully you will realize the worst thing about buying a home with a mortgage is the interest that comes from a 30 year mortgage. Once you do that, you can do what you do best, paying off debt quickly. Then again, you are in the camp who has faith in the stock market so maybe your extra money should go to that instead…

    • How so? We still would have qualified for a loan at 4.5% and with a financing contingency we still would have had to taken the loan right? We should have had an interest rate contingency. Haha.

  17. You may not have got the best deal but it’s still really is an awesome one. Your timing is fine, interest rates will continue to slowly go up and you may think of yourself as lucky in the future!!

  18. Very interesting post. Interest rates always seem to be very frustrating. I haven’t bought a home yet but I am hoping that I can enter the market at a good time.

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